United Liberty

I know what you’re thinking: man that Pete is a positive guy. I like to describe myself as realistic, with a bit of fatalism throw in. Either way, I find it hard to look at the economic landscape and have any hope. It is especially dreadful when politicians have to get re-
elected, AND said politicians consult certain “economists”.

Economists have for years looked at what is happening in a society and sought to come up with solutions as to how an economic crisis can be “fixed”. The problem is, like in all fields, you have good economists, and you have the not so good (The latter seem to be the ones that always find their way onto the public payroll).

In extremely broad terms economists can be split into two categories:

If you are a student of American history your eyes should be opening as to which economist is most often chosen by our elected officials. The real question is “why”?

Well, why wouldn’t a politician pick economist #2?

My apologies for posting so much about polls the last few days, but much of what is coming out is showing voters’ contempt for much of what has come out of since President Barack Obama took off last year.

Last year during the Obama Administration’s push for a Keynesian-style “stimulus” package, Americans were told that unemployment would not rise above 8% with the stimulus and would surpass 9% without it (see page 5 of the administration’s report, The Job Impact of the American Recovery and Reinvestment Program).

Unemployment is 10% today and jobs are still being lost, so it’s no wonder Americans believe the “stimulus” bill was a bad idea:

Fifty-six percent of people questioned in a CNN/Opinion Research Corporation survey released Sunday say they oppose the stimulus package, with 42 percent supporting it.

Last March, just weeks after the stimulus bill was signed into law by President Barack Obama, a CNN poll indicated that 54 percent of the public supported the program, with 44 percent opposed.

The program, formally known as the American Recovery and Reinvestment Act of 2009, attempts to stimulate the country’s economy by increasing federal government spending and cutting taxes at a total cost to the government of $787 billion. No Republicans in the House and only three in the Senate voted in favor of the bill.

Earlier this month the Associated Press reported that spending on transportation had no measurable impact on the economy, noting “spend a lot or spend nothing at all, it didn’t matter.”

President Barack Obama is rolling out a tax on banks to pay for the Wall Street bailout that was the centerpiece of the government’s intervention during the economic crisis:

President Obama laid down his proposal for a new tax on the nation’s largest financial institutions on Thursday, saying he wanted “to recover every single dime the American people are owed” for bailing out the economy.

With both anti-Wall Street sentiment and the budget deficit running high, Democratic leaders on Capitol Hill welcomed the proposal, which could ultimately raise up to $117 billion to cover projected bailout losses. Republicans were uncharacteristically silent, their instinctive opposition to tax increases apparently checked by their fear of defending big bankers. And the financial industry lobby seemed splintered, with small community banks happily exempted.
[…]
The proposed tax would apply to bank, thrift and insurance companies with more than $50 billion in assets and would start after June 30. It would not apply to certain holdings, like customers’ insured savings, but to assets in risk-taking operations. The levy would raise an estimated $90 billion over 10 years, according to the White House.

But it would remain in force longer if all losses to the bailout fund, the Troubled Asset Relief Program, were not recovered after a decade. The Treasury now projects that the losses from the $700 billion loan program, which was created in October 2008, could reach $117 billion, about a third of the loss that it projected last summer — an improved forecast that reflected the renewed strength on Wall Street.

Finally, some good news on the economy:

Ending a year of contraction, the United States economy grew in the third quarter, the Commerce Department said on Thursday. But even if a recovery is technically in the offing, job seekers likely will not begin to feel the benefits for months to come.

The nation’s gross domestic product expanded at an annual rate of 3.5 percent in the three months ending in September, a significant spike from a somewhat shrunken base. The economy had contracted at annual rates of 0.7 percent and 6.4 percent in the second and first quarters of this year, respectively.

Much of the growth can be attributed to the billions in federal aid devoted to economic renewal, including policies that encouraged consumer spending on cars and housing.

“That alters the dynamic of a recession and a recovery, and what you’re left with, to some degree, is an artificial recovery,” said Dan Greenhaus, chief economic strategist at Miller Tabak, an investment research firm. “Over the next several quarters, the support for the economy on the part of the government wanes and the economy has to find its own footing.”

Thomas Woods, author of the highly-recommended Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse, has both a scholarly article and a video out discussing the Harding Administration’s response to the economic downturn of 1920, which by some measures was even more severe than the Great Depression of the 1930s and what it can teach us today.

From the article:

You’ve probably seen the Disney film, Fantasia. In the segment called The Sorcerer’s Apprentice, Mickey Mouse is the apprentice, and he decides to use some of the sorcerer’s magic while the boss is away. The experience is glorious, until he realizes that he can’t control it any more and he finds himself drowning in a self-created flood.

[Thanks to Wikipedia.org for the illustration by S. Barth.]